One of the highlights of this year’s union budget is the government’s push for securing critical minerals, a sector crucial for India’s green energy transition, high-tech industries and national security. To this end, the central government has committed Rs 343 billion over a period of seven years to boost mineral activities, followed by India’s identification of 30 critical minerals in 2023.
Currently, global reserves of lithium, cobalt, nickel and rare earth elements are concentrated in a few countries. This presents a dual challenge for India – dependence on imports and the difficulty of developing and advancing up the value chain due to this concentration.
In this scenario, Renewable Watch provides an overview of the approach used by China, the US and the EU to secure critical minerals and also India’s strategy in this space…
Critical minerals’ value chain
At COP29, Rebeca Grynspan, Secretary- General of the UN Trade and Development, highlighted a $225 billion investment shortfall that needs to be addressed in critical mineral projects in the Global South. This is an enormous market, with valuations likely to exceed as the clean technology sector develops further.
Based on the International Energy Agency’s Critical Mineral Outlook 2024 report, the market for key energy transition minerals is slated to more than double by 2040 under its net zero emissions scenarios, reaching an estimated $770 billion. Additionally, BloombergNEF’s outlook goes further to show that transition metals can also become a $10 trillion market opportunity by 2050, as the demand for key metals essential for clean energy technologies is expected to grow fivefold under its net zero scenario.
To understand the market better, it is important that we also dive into the critical minerals supply chain across three key segments – upstream, midstream and downstream.
The upstream stage involves the extraction and primary processing of raw materials through mining and refining. As per the report titled “State of the Sector: Critical Energy Transition Minerals for India” by the Council on Energy, Environment and Water (CEEW), Centre for Social and Economic Progress (CSEP), Indian Council for Research on International Economic Relations (ICRIER), International Institute for Sustainable Development (IISD) and Shakti Sustainable Energy Foundation, copper resources are highly concentrated, with Chile and Peru accounting for 43 per cent of the global discoveries since 1990. The “Lithium Triangle” of Argentina, Bolivia and Chile holds more than half of the world’s lithium resources, with Bolivia possessing the largest reserves.
The midstream stage focuses on refining and processing raw minerals into high-purity materials used for industrial applications. China dominates this segment, refining 36 per cent of the world’s copper smelting and 35 per cent of the refining capacity, while consuming 54 per cent of the global refined copper. In lithium refining, China, Chile and Argentina lead, with China alone processing around 60 per cent.
The downstream stage involves end-use manufacturing and recycling, where refined minerals are used in products such as electric vehicle (EV) batteries, wind turbines and solar panels. For instance, battery manufacturing and EV production rely heavily on minerals such as lithium, nickel and cobalt.
Global strategies
The Chinese strategy
China was an early adopter of the export rebate system in the 1980s, which provided tax refunds of up to 17 per cent on rare earth exports. The Chinese government lowered costs for producers by making Chinese REEs (rare earth elements) cheaper and more competitive in the global markets.
By the early 2000s, China controlled over 90 per cent of the world’s REE supply, giving it significant leverage in the global markets. This came with challenges such as artificially low prices, which drove foreign competitors out of business.
As highlighted in the paper “Demystifying China’s Critical Minerals Strategies: Rethinking ‘De-risking’ Supply Chains” by Weihuan Zhou, Victor Crochet and Haoxue Wang, published in the World Trade Review, China’s policies reflected a classic export-led growth model, but also created market distortions and long-term regulatory challenges.
According to the same paper, China then shifted from promoting exports to strict resource control by imposing production limits and foreign investment restrictions to protect its rare earth industry. Foreign companies were only allowed to invest through joint ventures with Chinese firms, ensuring local control, while allowing China to gain access to advanced processing technology. This allowed China to move up in the value chain and shift from a raw material extractor to becoming the world leader in rare earth refining
and manufacturing.
Another interesting observation that can be made, as pointed out by the AidData 2025 report, is that a high percentage of Chinese ownership exists in energy transition-based mineral projects. The report highlights how Beijing has been using lending as a tool to establish control over resources across the world. By directing financial support towards Chinese-owned operations, China ensures greater supply chain security and long-term economic benefits from these resources.
Lessons from the US and the EU
Under the Inflation Reduction Act, the US has created incentives to retain value additions and mineral security, while countering China’s dominance. However, this is easier said than done against China. Hence, the US now faces cutbacks that lead to potential trade wars. For example, in December 2024, China announced a ban on exports of gallium, germanium and antimony to the US, following the imposition of restrictions on China’s chip sector. Antimony plays a key role in battery technology, making it an important component for clean energy sectors. With the US without any domestic deposits of antimony, this makes the global development of battery technology slower due to an unnecessary trade war.
India’s approach
As mentioned earlier, India remains largely reliant on imports for critical minerals such as lithium, cobalt, nickel and vanadium – key elements essential for the renewable energy transition, according to the Ministry of Mines’ “Critical Minerals for India” report. The government has introduced several reforms and policy measures in recent years. The Mines and Minerals (Development and Regulation) Amendment Bill, 2023 revised the MMDR Act, 1957 by removing minerals such as lithium, titanium, beryllium, niobium, tantalum and zirconium from the list of atomic minerals, thus opening them up for commercial mining. Parallelly, the government has allowed 100 per cent foreign direct investment under the automatic route for mining and exploration, easing entry for global players into India’s mineral sector. In light of these reforms, the Ministry of Mines had auctioned 24 strategic mineral blocks and has launched India’s first-ever auction of exploration licences for 13 critical mineral blocks. These initiatives are important in light of the high financial risks associated with early-stage mining projects, where unpredictable capital expenditures and cost overruns during construction can deter investments.
Additionally, this year’s budget eliminated customs duties on 25 minerals and reduced basic customs duties on two others. The government has also announced plans for supporting research through the establishment of a Centre of Excellence on Critical Minerals.
To complement these domestic efforts, India has also undertaken initiatives to foster international partnerships for mineral security. India established Khanij Bidesh India Limited (KABIL) in 2019, to identify and secure critical minerals overseas. Since its inception, KABIL has been actively forging strategic agreements with resource-rich nations such as Australia, Argentina and Chile to ensure a reliable supply of key minerals such as lithium, cobalt and nickel, vital for EV batteries and energy storage systems. In a recent milestone, KABIL signed a Rs 2 billion lithium exploration pact for five blocks in Argentina.
In addition, India is also strengthening multilateral cooperation through platforms such as the QUAD alliance – comprising the US, Japan and Australia. India is also a member of the Mineral Security Partnership, alongside the EU and the US. Furthermore, India has started discussions with countries in Africa to forge alliances in the critical minerals space, recognising the continent’s vast untapped reserves and its growing strategic importance for the global energy transition.
Net, net, India’s approach to international collaboration on critical minerals is rooted in strategic partnerships, bilateral agreements and multilateral platforms to secure diversified and resilient supply chains. Although a little late, India has not missed the bus and still has an opportunity to emerge as a key player in the critical minerals space.
